Buffett’s master class on the problem with gold
News Summary
Gold prices slipped on Friday after hitting a record high above $4,300 an ounce earlier this week. Despite this, gold is up more than 50% this year and has almost doubled since early last year, easily beating the S&P 500 and marking its best performance since the 2008 financial crisis. This current outperformance is particularly notable as previous instances typically occurred during stock bear markets or major economic crises. Given gold's incredible gains and the ease of investing via ETFs, some Wall Street strategists now suggest the precious metal should play a role in a diversified portfolio. The traditional 60% stocks, 40% bonds allocation is reportedly being replaced by a 60/20/20 split, with a reduced bond allocation making room for gold and Bitcoin. Strategists cite that stocks and bonds are moving in the same direction too often, while inflation, geopolitical risk, and government spending and high debt loads mean bonds no longer offer the protection they once did. While Warren Buffett, now 95, has not commented recently, he has consistently viewed gold as an inferior long-term investment. At the 2011 Berkshire Hathaway annual meeting, he categorized investments into three types: currency-denominated assets, non-productive assets bought solely for future resale (like gold), and productive assets that generate value (like farms or businesses). Buffett emphasized his preference for productive assets, which deliver value over time, rather than relying on the hope that someone else will pay more. His late partner Charlie Munger also called it “peculiar” to buy an asset that only appreciates if the world “goes to hell.”
Background
Since President Trump's re-election in 2024, the global economic landscape has continued to face multiple challenges. Persistent inflationary pressures, escalating government debt in major economies, and heightened geopolitical tensions have collectively prompted investors to re-evaluate their investment strategies. Against this backdrop, gold, a traditional safe-haven asset, has seen its appeal significantly increase. Fueled by eroding confidence in fiat currencies and traditional financial assets, gold prices have risen consistently through 2025, reaching new record highs this week. This trend has led Wall Street strategists to reconsider the classic 60/40 stock-bond portfolio, proposing a shift of some bond allocation into alternative assets like gold and cryptocurrencies, seeking better diversification and protection amidst current uncertainties. Buffett's long-standing critique of gold's unproductive nature stands in stark contrast to the market's current embrace of its safe-haven attributes.
In-Depth AI Insights
Is Buffett's long-standing critique of gold still relevant in the current market environment? Buffett's stance that gold produces nothing and is purely speculative needs to be viewed dialectically in today's market, characterized by high inflation, government debt, and heightened geopolitical uncertainty. - Increased Relevance: His core argument—that investments should focus on assets that create productive value—is an eternal truth. If investors buy gold purely based on the